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Sunday, January 23, 2011

FIDELITY INDIA CHILDREN'S PLAN - A REVIEW

It’s Different!

While most Child funds in the mutual funds are hybrid in nature with very little to differentiate each other, Fidelity has tried to create its own space by adding unique options hereto unavailable in child plan by Mutual funds.

The Fidelity India Children's Plan has provided investors with a good variety of unique investment options.

OPTIONS....

The Fidelity India Children’s Plan will have three sub Funds which you can choose…

Education Fund : Asset allocation under the Education Fund will comprise of 70 per cent equity and 30 per cent debt to provide funds over the long-term for children''s education.

Marriage Fund : The Marriage Fund will have asset allocation of 70 per cent equity, 20 per cent gold ETFs and 10 per cent in debt.

Saving Fund : The Savings Fund will have only Debt exposure and the asset allocation will be up to 100 per cent in debt and money market instruments to provide stability.

Fidelity India Children’s Plan (FICP) is a hybrid fund which combines equity, fixed income instruments and gold ETFs. The fund offer three distinct funds under it viz. Education Fund, Marriage Fund and Savings Fund, where one can invest in, and each of them are intended to achieve their stated objective. Investors can opt for any of the funds for their investments, depending upon their financial goal – being children education, marriage or mere savings.

The FICP “Education Fund” exposes its investors to two asset classes – equity and debt, while the FICP “Marriage Fund” exposes its investors to three major asset classes – equity, debt and gold. The FICP “Savings Fund” on the other hand invests only in debt and money market instruments.

These Hybrid options give investors exposure to low co-related assets. So, when you feel that Gold is not looking attractive as investments, Equity will take care of your returns.

In contrast to most hybrid mutual funds in the market, Fidelity India Children's Plan will have dedicated fund managers for both the equity and debt portions of the portfolios. The Equity Portion will be managed by Nitin Bajajwho also has a good track record in managing Fidelity Special Situations Fund.

RECOMMENDATION :

Fidelity has understood the physic of Indian investors well and has included "Gold" also in its Marriage Fund. Gold has been long considered a natural hedge against inflation and Indian Marriages do have more than 20% of their expenses directed towards Gold.

The Fidelity India Children's Plan can be considered with a long term view. The Fund has all the potential to ensure good returns. Its Gold Exposure should ride out volatility and beat inflation over the long term.The auto balancing would ensure that downside is protected.

Savings Fund which invests predominantly in debt and money market instruments suitable for conservative investors and those nearing their financial goals and

Instead of looking at Child ULIPs, you should seriously consider investing in this Fund, as the costs are not only cheaper, but also the withdrawal are easy and returns should be far superior.

So, the vote is INVEST.

NOTE :

There will be no charge for switching between different options of the same fund or between funds within the plan and for transfers under STP.

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